Charles Clarke, the Home Secretary, has asked the chief constables of all of the UK's 43 police forces to send him proposals on how the forces could work better together. The outline proposals went in on Friday with more detailed plans due by the end of this year.

Sir Ian Blair, the Metropolitan Commissioner, and Dr James Hart, the Commissioner of the City of London force, have both proposed that they merge their economic crime squads into one force, The Independent on Sunday has learnt.

The two police chiefs agree that the new super squad, which would be the de facto national fraud squad, would come under the control of Dr Hart. This plan is also supported by Robert Wardle, the director of the Serious Fraud Office (SFO), and is likely to gain the backing of both the Attorney General and the Treasury, who see Dr Hart as an expert in economic crime detection.

Dr Hart was asked last week by the Attorney General, Lord Goldsmith, to join a review panel looking at how best to improve the way economic crime was tackled. As part of this, the Government is changing the law so that complex frauds are tried by a judge without a jury.

The City of London squad has been used by the SFO as a quasi national fraud squad, helping when crimes have taken place in areas with small fraud teams. While the City of London team has more than 100 officers in its economic crime team, Cumbria has just two, while Bedfordshire is said to have no fraud squad at all.

The City of London was the first force to be given a so-called "leading role" under Home Office proposals put forward last year.

Though Dr Hart and Sir Ian agree about combining their economic crime units, the two police chiefs disagree about other ways of going forward. Plans to merge the two forces completely are off the agenda after they were heavily opposed by the City of London force and found to require an Act of Parliament.

However, Sir Ian is favouring a plan that would take away the City of London's territorial policing role - transferring the bobbies on the beat to the Met. This plan, which is backed by London's Mayor, Ken Livingstone, would give Sir Ian overall charge for terrorism prevention.

The City police oppose this, saying their record on terrorism is exemplary. Dr Hart has offered to give the Met responsibility for "Level Two" policing, which is large-scale crime investigations, such as murder, rape or armed robbery.